The University of Phoenix lawsuit filied six years ago by two ex-admissions staffers has been settled for $78.5 million—in what lawyers say is one of the largest pay for performance compensation settlements ever reached.
The University of Phoenix university's parent company, The Apollo Group, agreed to pay $67.5 million to the federal government for the UOP fraud and $11 million in attorney's fees and costs for the plaintiffs. In doing so, The Apollo Group did not admit any wrongdoing for the bonus compensation, and executives for the University of Phoenix university said they did not expect any prosecution from the Department of Education in addition to the University of Phoenix lawsuit charges.
The University of Phoenix lawsuit by former admissions counselors Mary Hendow and Julie Albertson charged the for-profit online university with paying recruiters bonus compensation and other pay for performance compensation (including DVD players and spa trips) based on the number of students they enrolled, which is illegal for schools receiving federal student aid money. The school denied the bonus compensation allegations.
"The settlement is a huge victory for taxpayers and the federal government," announced Robert J. Nelson, lead attorney for the UOP fraud case plaintiffs. "This settlement sends a clear message to the for-profit education industry [that] compliance with the Higher Education Act's incentive compensation ban must be achieved."
Lawyers for the University of Phoenix lawsuit plaintiffs said the award is one of the largest ever reached for a False Claims Act case in which the government declined to intervene as a plaintiff. The Department of Justice had filed several briefs and participated in hearings supporting the plaintiffs' claims of UOP fraud but did not formally intervene.
The False Claims Act permits whistleblowers to sue on behalf of the government for fraud committed against the government and share in the recovery if the suit is successful. The plaintiffs in this bonus compensation lawsuit will receive a percentage of the settlement as a reward for coming forward, but the specific amount has not been disclosed.
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